Housing Price-to-Income Ratio
Median home price relative to median household income
“Houses became unaffordable after 1971 because fiat money inflated asset prices.”
Housing affordability deteriorated in waves — the late 1970s, mid-2000s, and post-2020 — driven by zoning restrictions, population shifts, interest rate changes, and speculation, not just monetary policy.
Perspectives
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A supply crisis amplified by cheap credit
Housing unaffordability stems primarily from insufficient supply in high-demand areas, amplified by low interest rates, tax incentives, and speculative buying.
The ratio has risen in waves tied to specific events: late-70s inflation, mid-2000s subprime bubble, post-2020 pandemic boom. Each wave had distinct causes. Monetary policy played a role but zoning restrictions are the structural foundation of the crisis.
Causal Factors
Zoning & land use restrictions
30%Local zoning laws restrict housing supply in high-demand areas, driving up prices. States like California and New York are especially constrained.
Low interest rates & credit expansion
25%Lower mortgage rates increase buying power, but push up prices. The 30-year mortgage itself is a government-backed subsidy to homeowners.
Population growth in metro areas
20%Urban population grew from 64% to 83% since 1950. More people competing for constrained housing supply in desirable metro areas.
Housing as investment vehicle
15%Tax policy, 1031 exchanges, and cultural attitudes made housing a primary investment, increasing demand beyond shelter needs.
Construction cost increases
10%Labor shortages, material costs, and regulatory compliance increased the cost of building new housing.
Data Source
Key Events
Nixon Shock
Dollar decoupled from gold
Proposition 13
California's tax revolt limits property taxes, copied nationally
Capital gains exclusion
Taxpayer Relief Act excludes $250K-$500K home sale gains from taxes
Housing bubble peak
Subprime lending drives prices to unsustainable levels
Crash
Housing market collapses, triggering the Great Recession
Pandemic boom
Low rates + remote work + stimulus fuel a historic price surge